Wednesday, 2 December 2009

While the politicians talk, business can profit from climate change

One of President Obama's favourite building materials suppliers has the solution to a rather big problem.

By Richard Tyler Published: 5:13PM GMT 01 Dec 2009
The world consumes around 15 terawatts of energy and this is forecast to double in the next 20 to 25 years. Add together all the planned alternative energy projects and you gain a few terawatts of power. Build 45 new nuclear power stations and you get a couple more terawatts. It's nowhere near enough. A wealthier world will demand more power.
Enter Mark Mitchell, chief operating officer of US green company of the moment Serious Materials. He argues that if developed economies can reduce demand for energy while still growing there is hope for the ambitious carbon emissions targets that may be agreed by world leaders at the United Nations Climate Change conference in Copenhagen next week.
Serious Materials sounds sexy, but isn't. It simply makes high-performance windows and drywall. But venture capital firms have just invested around $120m (£73m) in the company and President Obama recently championed the reopening of one of its plants outside Pittsburgh.
For Mitchell the biggest energy savings can be found not from taxing air travel or hiking fuel duty but by making factories, offices and housing more energy efficient. He points to the window of the room in the Judge Business School building where we meet and says that if it was better insulated it could reduce the room's energy loss by more than 50pc. "It's an open sieve." There are a lot of windows like that in Cambridge.
Serious Materials is now retrofitting tens of thousands of windows in public buildings across the US as it benefits from the billions being spent under The American Recovery & Reinvestment Act. Private-sector housebuilders battered by the recession have been a harder sell. Mitchell says there is progress but innovation does not come naturally to this industry. "It's like pulling a wet noodle up a hill," he admits.
Demand for change needs to come from consumers. Mitchell points with some enthusiasm to Britain's compulsory system of commercial property energy performance certificates – the US has a voluntary approach so far.
But the Royal Institute of Chartered Surveyors is less optimistic. It says there is little pressure on landlords to improve properties with existing tenants on long leases. Energy efficiency may influence the rent a new tenant is prepared to pay.
But this is only happening at the margins. RICS calls on the Government to follow Germany's lead and match legal compliance with incentives to invest.
It is already happening on a small scale. Thanks to a generous interest-free loan from the Treasury via the Carbon Trust, tank part maker Astrum has pushed the button on investment that could slash its electricity bill in half. The electricity savings cover the interest payments. "It was a no brainer," is how Astrum puts it. The Chancellor could use his pre-Budget report to do more.
Bank Charter con?
Small business charters have become the rage as banks attempt to repair broken fences. The two banks with taxpayers as shareholders – Lloyds Banking Group and NatWest (and its parent Royal Bank of Scotland) – have responded to government pressure to provide more support.
The cold shoulder is being replaced by tea and sympathy. Lloyds was first off with a commitment to provide a clearer and fairer charging regime with fees for loans and overdrafts pegged at 1.5pc of the overall value. NatWest and RBS are following suit with a similar annual cap for businesses with a turnover up to £25m. The pair say that nine out of 10 small businesses have had overdraft facilities renewed at the same or lower rate following a price and overdraft promise last year.
Wrapping the small business measures in a charter makes the packages sound grander than they are but the banks can be forgiven for a little marketing licence. The mere use of the word charter, however, makes it all sound solemn and binding. Can the first breach of the charter be far away? A public pat on the back to the first business that manages to use the charter to get its errant bank manager to change his mind